Correlation Between El Ahli and Arab Aluminum

Can any of the company-specific risk be diversified away by investing in both El Ahli and Arab Aluminum at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining El Ahli and Arab Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between El Ahli Investment and Arab Aluminum, you can compare the effects of market volatilities on El Ahli and Arab Aluminum and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in El Ahli with a short position of Arab Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Ahli and Arab Aluminum.

Diversification Opportunities for El Ahli and Arab Aluminum

0.61

Correlation Coefficient

El Ahli  Arab Aluminum

Poor diversification

The 3 months correlation between AFDI and Arab is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding El Ahli Investment and Arab Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Aluminum and El Ahli is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on El Ahli Investment are associated (or correlated) with Arab Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Aluminum has no effect on the direction of El Ahli i.e., El Ahli and Arab Aluminum go up and down completely randomly.

Pair Corralation between El Ahli and Arab Aluminum

Assuming the 90 days trading horizon El Ahli Investment is expected to under-perform the Arab Aluminum. In addition to that, El Ahli is 1.05 times more volatile than Arab Aluminum. It trades about -0.01 of its total potential returns per unit of risk. Arab Aluminum is currently generating about 0.09 per unit of volatility. If you would invest  1,369  in Arab Aluminum on September 5, 2024 and sell it today you would earn a total of  122.00  from holding Arab Aluminum or generate 8.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

El Ahli Investment  vs.  Arab Aluminum

El Ahli Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Ahli Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, El Ahli is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arab Aluminum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Aluminum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Aluminum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with El Ahli and Arab Aluminum

The main advantage of trading using opposite El Ahli and Arab Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Ahli position performs unexpectedly, Arab Aluminum can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Arab Aluminum will offset losses from the drop in Arab Aluminum's long position.

The idea behind El Ahli Investment and Arab Aluminum pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.